October 20th, 2021
Consumers outlook on the economy weakened, while retail sales increased and layoffs enjoyed a solid decline.
Consumer outlook ticked down in October, with the Index of Consumer Sentiment dropping to a score of 71.4 for the month, which was down 1.9 percent from September’s score of 72.8, according to last week’s preliminary results from the University of Michigan Surveys of Consumers. Compared to the same period a year ago, this was 12.7 percent below October 2020’s score of 81.8.
The Index of Current Economic Conditions, which describes how consumers feel about the current state of the economy and their place in it, fell to 77.9 for October, which was 2.7 percent below September’s ranking of 80.1. When compared to the same period a year ago, October was 9.3 percent down from October 2020’s score of 85.9.
The Index of Consumer Expectations, which assesses how consumers feel about where the economy is headed, also dropped in October, falling to 67.2, which was 1.3 percent down from September’s score of 68.1. When compared to last year, October’s score was 15.2 percent below October 2020’s ranking of 79.2.
For the last three months, consumer sentiment has been at levels on par with those seen when Covid-19 lockdowns first began, and the reasons behind that weakening outlook are multi-layered, according to Surveys of Consumers’ Chief Economist Richard Curtin.
“The Delta variant, supply chain shortages, and reduced labor force participation rates will continue to dim the pace of consumer spending into 2022,” he said in comments accompanying the data release. “There is another, less tangible factor that has contributed to the slump in optimism: confidence in government economic policies has significantly declined during the past six months.”
Looking at consumer spending during the previous month, retail sales rose to $625.4 billion in September, an increase of 0.7 percent from August’s total of $620.8 billion, the Census Bureau reported last week. When compared to the same period a year ago, September’s sales were 13.9 percent higher than September 2020.
Retail categories that saw significant gains in September included sales at sporting goods, hobby, musical instrument and book stores, which surged 3.7 percent; general merchandise stores, which rose 2 percent; miscellaneous retailers, which grew 1.8 percent; gas stations, which also expanded 1.8 percent; and clothing and clothing accessories stores, which increased 1.1 percent.
September’s gain beat economists’ expectations of a 0.2 percent decline for retail sales and marked the second month of gains. Both were encouraging signs, according to Gregory Daco, chief U.S. economist for Oxford Economics.
“While the month-over-month numbers have changed, what really matters is the trajectory of consumer spending,” Daco told the New York Times last week. “An improving health situation should spur renewed consumer optimism while a resilient jobs recovery should support income growth.”
Initial Jobless Claims
In employment news, first-time claims for unemployment benefits filed by recently unemployed Americans during the week ending October 9th dropped to 293,000, a solid decline of 36,000 claims from the previous week’s total of 329,000, the Employment and Training Administration reported last week.
This was considerably lower than economists’ expectations of a smaller decline in initial jobless claims to 318,000. And marked the lowest level for initial claims since March 14, 2020’s weekly claims of 256,000. Economists consider anything lower than 300,000 claims a sign of a growing job market.
The four-week moving average, which is considered a more stable measure of jobless claims, fell to 334,250, which was 10,500 claims below the preceding week’s average of 344,750 claims. Like the weekly total, this was the lowest level for the four-week average since March 14, 2020, when it was 225,500.
This week, we can expect:
Monday – Industrial production and capacity utilization for September from the Federal Reserve.
Tuesday – Housing starts and building permits for September from the Census Bureau and the Department of Housing and Urban Development.
Thursday – Initial jobless claims for last week from the Employment and Training Administration; existing home sales for September from the National Association of Realtors; leading economic indicators for September from The Conference Board.
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